More hints of USA trade détente with Canada, EU

Posted September 14, 2018

Freeland was set to meet with U.S. Trade Representative Robert Lighthnizer before heading to Saskatchewan for a Liberal Party caucus meeting and could be returning to the U.S. capital later in the week.

U.S. President Donald Trump has threatened to push ahead with a bilateral deal with Mexico, effectively killing the nearly 25-year-old three-country NAFTA pact, which covers $1.2 trillion in trade.

Chapter 19 provides that an arbitration court decides on trade disputes between the two countries.

Trudeau has been signalling in recent days that Canada might be prepared to show some flexibility there.

They oversaw the last two weeks of talks but the sides were unable to resolve their differences over USA access to the Canadian dairy market, a cultural exemption for Canada in the original NAFTA and the Chapter 19 dispute resolution mechanism. But as an October 1 deadline to renegotiate NAFTA looms, Canada is prepared to offer similar concessions on the dairy industry to those that it agreed to in free trade deals with the European Union and Pacific Rim nations, the sources said. But Larry Kudlow, the director of U.S. President Donald Trump's National Economic Council, suggested Friday that Canada isn't offering enough. "It appears as if there is not a whole lot of momentum right now".

One of the issues for Canada in the revised deal is the US effort to dump the Chapter 19 dispute resolution mechanism that hinders the United States from pursuing anti-dumping and anti-subsidy cases.

Canada is the United States' second-largest trading partner, with US$673 billion in total goods and services crossing the border in 2017.

What's at stake is huge for both the US and Canada. "There is progress made".

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Uncertainly over the future of NAFTA, which underpins $1.2 trillion in North American trade, is weighing on markets as well as the Canadian and Mexican currencies.

The officials have held two weeks of talks but ended Friday afternoon without reaching an agreement that would keep Canada in the three-nation pact.

"I think it is good for him in the short term".

But U.S. economists argue the dispute resolution is "on the balance".

He said, however, it was wrong for Canada to have publicly declared it would not accept concessions on certain files.

"We've taken those hits for team Canada, and we are determined that there be no further concessions on dairy", said David Wiens, vice president of the Dairy Farmers of Canada.

Freeland will head back to Canada for government business and to report to Canadian Prime Minister Justin Trudeau what transpired during the day's talks and where the negotiations stand.

Experts note that the desire to make a trade deal happen is influenced by upcoming political events, including the USA midterm elections in November, a transition of presidential power in Mexico in December and next year's Canadian election.